(Retail Inventory Method) Fuque Inc. uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to a single department for the month of October 2013.
|
Inventory, October 1, 2013 |
|
|
At cost |
$ 52,000 |
|
At retail |
78,000 |
|
Purchases (exclusive of freight and returns) |
|
|
At cost |
272,000 |
|
At retail |
423,000 |
|
Freight in |
16,600 |
|
Purchase returns |
|
|
At cost |
5,600 |
|
At retail |
8,000 |
|
Markups |
9,000 |
|
Markup cancellations |
2,000 |
|
Markdowns (net) |
3,600 |
|
Normal spoilage and breakage |
10,000 |
|
Sales |
390,000 |
Instructions
(a) Using the conventional retail method, prepare a schedule computing estimated lower of cost or market inventory for October 31, 2013.
(b) A department store using the conventional retail inventory method estimates the cost of its ending inventory as $60,000. An accurate physical count reveals only $47,000 of inventory at lower of cost or market. List the factors that may have caused the difference between the computed inventory and the physical count.